Dollar-yen is expected to struggle to rise in the European and U.S. foreign exchange markets on the 15th. While expectations for a U.S. rate hike are increasing, yen buying may weigh on the pair against the backdrop of the Bank of Japan’s policy stance.
U.S. inflation data released last week showed inflation remaining elevated, and speculation about a rate hike by the Federal Reserve spread on the 14th. The dollar softened as U.S. yields fell, then recovered, while euro-dollar rose from the ¥1.1520 range to the ¥1.1560 range before losing momentum. Dollar-yen fell from around ¥155 to around ¥154 before recovering slightly. In Asian trading, U.S. long-term yields are expected to remain elevated ahead of the monetary policy decisions in Japan and the U.S., while dollar-yen is expected to move toward ¥155.
In overseas markets ahead, speculation about U.S. monetary policy is likely to spread, and there may be periods when inflationary pressures in the U.S. become more pronounced. Trading is expected to become subdued as markets await tonight’s FOMC, while the FedWatch probability of a rate hike has reached more than 90%. If long-term yields remain elevated, dollar buying is likely to lead trading, although sentiment is also likely to focus on the future policy stance, prompting some to expect dollar buying to remain limited. A 0.25% rate hike at the Bank of Japan’s monetary policy meeting has already been priced in, but yen selling is likely to remain restrained as markets look ahead to future policy.
Scheduled events in the European and U.S. markets today include Germany’s ZEW Indicator of Economic Sentiment for September and the Empire State Manufacturing Survey for September from the Federal Reserve Bank of New York. The FOMC is scheduled to meet through the 16th, with the release of its decision approaching.